CHRIS UHLMANN:
Treasurer, welcome.
TREASURER:
Thanks, good to be here, Chris.
UHLMANN:
So, how will your Budget improve the lives of ordinary Australians?
TREASURER:
It all comes down to a stronger economy. If your economy is stronger then there are more jobs, which is what Australians rely on. You can guarantee the essential services they rely on, Medicare, hospitals, schools, care for older Australians. And at the end of the day the Government has to live within its means. So, you have to do those three things in a Budget. A stronger economy, guaranteeing the essential services Australians rely on because of that stronger economy, and the Government always has to live within its means which means controlling your spending and controlling your taxes.
UHLMANN:
What about putting money in people's pockets, will there be personal income tax cuts?
TREASURER:
We have flagged for many, many months now that our priority is on delivering tax relief for low to middle income earners. And there is a good reason for that, they have been doing it tough, it's been some time since they have had a decent pay rice. As we have seen things improve and the economy has strengthened, they should be the first to whom we seek to provide that tax relief for working Australians. We need to provide reward and incentive for people who have been working hard.
UHLMANN:
And they will see that relief in this coming financial year?
TREASURER:
The Budget is on Tuesday night. What we are making really clear is we will only do those things that are affordable and responsible. The Prime Minister said that when he first flagged this, last November. Our Budget is one that stays on track to a balanced Budget, but it is also one that is strengthening that economy so we can do these things. We think higher taxes is not good for the economy, it's not good for Australians because whoever is levied with them, everyone else pays for it.
UHLMANN:
What about those who will dismiss these tax cuts as just a hamburger and milkshake a week.
TREASURER:
For a start they would be referencing back to something many, many years ago at a time when tax cuts were being handed out a lot more often, one. Two, it's been a long time since there has been some real relief in this area. And, if they were to make that observation then it would be very hard to say that the Government is being irresponsible at the same time. You can't have it both ways. What we have always said is that we would provide tax relief that is affordable and responsible. So, I'm not going to pretend that these are going to be mammoth tax cuts, or anything like that, that wouldn't be responsible. They will be what is affordable, they will be real and they will be within what the Budget can afford.
UHLMANN:
Now, people also care about their services. The Government was on the receiving end of a 'Mediscare' campaign. That only worked because it was credible, what can you do to assure people that you are going to look after their services?
TREASURER:
Well, it wasn't credible that the Government was going to sell Medicare, that was a ridiculous suggestion and I think that people didn't accept that...
UHLMANN:
People did think it was possible, you had Medicare co-payments, so people thought it was possible you might attack Medicare.
TREASURER:
Well, no you said sell Medicare, and we haven't sold Medicare.
UHLMANN:
I didn't say that.
TREASURER:
That's what the campaign was about. But no you're right, Australians want to be guaranteed about Medicare. They want to be guaranteed about the Pharmaceutical Benefits Scheme and that's why in last year's Budget we set up the Medicare Guarantee Fund to guarantee all that funding. Over $30 billion has already been put in that fund which is guaranteeing those essential services. Like any essential service, whether it's schools, whether it's hospitals, whether it's Medicare, what funds it is a stronger economy. You can't create a stronger economy with higher taxes. If you burden the economy with crippling taxes then you actually put those very services; Medicare, hospitals, schools, at great risk because it's the stronger economy that pays for it. The money just doesn't fall out of the sky. The economy must be strengthened. That's the guarantee.
UHLMANN:
There are lots of demands on the Pharmaceutical Benefits Scheme, but there are lots of very worthy causes. I understand you are going to be addressing one of these in the Budget?
TREASURER:
When it comes to essential services you can't really go past this. Spinal Muscular Atrophy is a heartbreaking genetic condition suffered by not a lot of young Australians, but the sooner you can diagnose it early, the better. Those families who currently have children that are dealing with this condition have to shell out almost $370,000 a year for that medication called Spinraza. Now, we are putting that on the PBS. And if those families are already going to be able to access their drugs right now, we have been working with the medicine sector to ensure they can achieve it right now. That will reduce that to less than $40 a script. That's a cost of $240 million, but for these kids, for their families there is no more essential service than keeping their kids alive.
UHLMANN:
What made you think that this particular one was worthy?
TREASURER:
It was in the last year I attended one of those forums where various groups come to Canberra and I heard that story. And I'd heard it also through my own local electorate. So, I looked a lot more into it. I sat down with Greg Hunt and the Prime Minister and others and we said this is something you need to do. This is what a stronger economy can do. It can prolong the life of young kids, it can hopefully lead to them, when their muscles are deteriorating, that they strengthen and the research and results elsewhere has shown that can occur. This is something I think is very necessary. It's indicative of our broader approach. Essential services like that must be guaranteed. That's why we have guaranteed the Pharmaceutical Benefits Scheme.
UHLMANN:
Tax cuts, more services, a return to surplus – where are you getting the money for all of this?
TREASURER:
What we have seen is people getting back into jobs – 415,000 jobs last year. So, when you've got people who are no longer on welfare payments and are actually in jobs paying taxes, that's what happens. When you've got companies that have gone through four or five years of difficult periods where they were making losses and those losses have now been absorbed up and they are actually now getting into positive territory and paying taxes – that's where the revenue comes from. Create a stronger economy, ensure people are in work. We now have the lowest level of welfare dependence of people of working age than any time in the last 25 years. That is a major turnaround. I was watching the footy last night, as people expect, you get a 12 point turnaround, that is, you stop them from scoring and then you score yourself. It went the other way last night with the Sharks, I have got to say but nevertheless.
UHLMANN:
You must have got nervous as things started to turn. And things can turn. Your revenue boost may be temporary but these promises you are making are permanent. So, is there a concern that over time we might see a return to big deficits?
TREASURER:
You have to ensure that you build your Budget up to surplus, which is exactly what we are doing. We are not getting there by just taxing the economy into oblivion because that is like the snake eating itself from the tail. It is a self-defeating exercise. It never ends well. What you need to do is keep your spending under control. We have the lowest rate of expenditure growth of any Government in the last 50 years and more. Then, if you are going to make expenditure commitments, like the one I have just talked about, then you've also got to make the savings at the same time to make sure you pay for them. The other thing you want to do is keep taxes under control and we have a firm tax speed limit in this Budget. If you go above that tax speed limit you are putting jobs and the economy and essential services at risk.
UHLMANN:
When you came into power in 2013 you talked about the debt and deficit disaster. The debt is higher now than it has ever been.
TREASURER:
And over that period of time we have been bringing the deficit down year after year after year.
UHLMANN:
The deficit but not the debt.
TREASURER:
The debt growth, when we came to office, has reduced by two-thirds.
UHLMANN:
It's reduced but it's continuing to grow.
TREASURER:
Of course, because you are in deficit, Chris. You can't reduce the debt if you are still in deficit.
UHLMANN:
But it was a debt and deficit disaster.
TREASURER:
And that's why the Government has been working to reduce the deficit year on year on year.
UHLMANN:
Why not use all your cash to pay that debt down?
TREASURER:
Because you've also got to run a strong economy. You've got to run a strong economy where people can be guaranteed the essential services they rely on and you need to have a responsible, methodical path back to Budget balance which is what we have been doing for five successive statements and it will be six on Tuesday night. We have kept exactly on our trajectory back to a balanced Budget. That's what's kept our AAA credit rating intact, one of only ten countries to do so at one of the most difficult times in Australia's financial history, coming off the back of a mining investment boom which ripped $80 billion out of the Australian economy. That had a far more significant impact on the Australian economy and what people were earning in this country, holding wages back, than the GFC ever did.
UHLMANN:
Is the money good enough to get you back to surplus a year earlier? Next year for example?
TREASURER:
As my good friend and colleague Mathias Cormann says, the Budget is on Tuesday night at 7:30.
UHLMANN:
He says it exactly like that. The 1 per cent of GDP is what you were aiming for, that was a target you set in the past, so a surplus of 1 per cent of GDP?
TREASURER:
The fiscal rule said that we would return to that level as soon as possible. That's what the fiscal rules say.
UHLMANN:
And what's actually happening?
TREASURER:
Tuesday night, tune in.
UHLMANN:
Is that your aim though? Are we going to get back to 1 per cent of GDP?
TREASURER:
The fiscal rules haven't changed.
UHLMANN:
Alright, so that's what we can hope for.
TREASURER:
It says as soon as possible. That is what the fiscal rules say.
UHLMANN:
So it might be next year, the year after or ten years down the track.
TREASURER:
Again, Tuesday night.
UHLMANN:
Don't you think one of the big problems this Government has had from the outset is not a budget deficit, it's a trust deficit. You say that we need to fill a debt and deficit disaster and one of the things you did immediately on coming to Government was lift taxes on those people over $180,000 a year. Now, you say that would be a disaster. Why? You did it yourself?
TREASURER:
At the 2016 election and from then we have kept every promise we made. When
Malcolm Turnbull took our Government to the last election and I was there as Treasurer, every promise, every commitment we made at that election we have kept.
UHLMANN:
Problem is you came into government in 2013.
TREASURER:
Sure.
UHLMANN:
You can't just scrub the ground of everything that happened in 2014.
TREASURER:
All I am saying is, last time we went to the polls we said what we would do. We have been doing what we said we would do and we will keep doing that. We have kept every commitment that we took as a Prime Minister and Treasurer to the last election.
UHLMANN:
Why aren't you looking at lifting some of these taxes? What's the problem with doing that? You've run an experiment yourself. You put a deficit levy on the top income earners and the economy continued to improve. So, there is clearly not a problem with doing that.
TREASURER:
I don't think that helped. I don't think higher taxes ever help. That was also being done and we were still under the tax speed limit which the Government has been working to now for some years. The tax speed limit we have set, if you don't control your taxes you can't control your spending. If you allow yourself the indulgence of just letting taxes go off into the never-never like our opponents are saying. Well, you are never going to control spending. The only reason people ever want to see taxes rise is because they can't control their spending. We think it's important to have two rails. Keep control on taxes, keep control on spending, and that's how you get yourself on a sustainable path to a Budget balance that can guarantee the essential services that Australians rely on, because it delivers and supports a stronger economy.
UHLMANN:
But again on taxes you were preparing to lift the Medicare levy. Something you only dumped because you couldn't get it through the Senate. So, that's a tax increase.
TREASURER:
We didn't need to continue with that increase because we were able to source the revenue alternatively. I don't think you should increase taxes if you don't have to. Over the course of that year that measure no longer became necessary, and equally, when that measure was put into the Budget we were still below the tax speed limit. What I am saying is, the tax speed limit is really important. We are going into the next ten years, what does the economy that we are going to live in look like over the next ten years? That is the real question that frames Budgets. Now, I remember when I left school, when I came out of University, I walked into an economy where people were paying excessive interest rates, more than one in five people of working age were on welfare, the unemployment rate was way higher than it was now, a million people out of work and we went into recession. That's not the economy that I want people and Australians to live in. And that's what we are going to do in this Budget and what we have been doing for successive Budgets. That's not the economy we are going to bequeath to Australians.
UHLMANN:
Speaking of welfare though, isn't it time to raise unemployment benefits?
TREASURER:
I think it's time to get Australians into jobs…
UHLMANN:
…surely can't afford…
TREASURER:
…and there are a myriad of benefit payments and other payments as part of our strong social safety net which are there to provide support in those situations, but the best form of welfare is a job. There are 415,000 Australians who in just the last year have been able to make that change over from welfare into a job and under the course of our Government almost a million.
UHLMANN:
Now, are you going to keep the energy supplement? You were going to dump that at one stage.
TREASURER:
We will outline what we are doing on Tuesday night, Chris.
UHLMANN:
This one has been well and truly flagged. It is hardly the last veil…
TREASURER:
What I will say is in last year's Budget we made a whole range of changes of matters that we're not progressing through the Senate. Now, there are still a number of matters that are still before the Senate, including that one. These are matters that we will be provisioning for in this Budget. What I mean by that is, we have learned over some years you can't always predict what the Senate is going to do and you need to give yourself some room for Mathias and his colleagues to be able to work matters through the Senate.
UHLMANN:
Company tax cuts, going ahead with that?
TREASURER:
Yes.
UHLMANN:
Hard argument now.
TREASURER:
Why?
UHLMANN:
Because of the banking inquiry. How much money will you hand back to the banks?
TREASURER:
I'll tell you what we are taking from banks between now and over the next ten years…
UHLMANN:
That's right, you have another tax, you have got a banking levy.
TREASURER:
It's called a banking levy, that's right.
UHLMANN:
So, not all taxes are bad then?
TREASURER:
The banking levy levies the banks on the implicit guarantee that they receive from Australian taxpayers, which they are quite specific and unique in having that advantage that the rest of the economy doesn't have. That levy will raise over $16 billion by the time the corporate tax cuts reach at 25 per cent of the whole economy. So, $16 billion dollars will come out of the major banks and a corporate tax rate which will make us competitive with the rest of the world again, will ensure that we are getting investment, jobs and growth and wages increases, that's what the plan does. See, Chris, we have a plan to grow the economy. We have a plan to increase investment. That plan has been working. That plan is bringing the Budget back into balance, that plan is guaranteeing essential services and we will keep doing it by living within our means. I don't think businesses paying the Government more money or people sitting around their kitchen table paying more money to me in personal income taxes is a good way to run the economy.
UHLMANN:
But your big argument is that Labor is going to impose more taxes on the economy and it will slow it down but you don't mind imposing a tax on the high income earners, you don't mind imposing taxes on the banks, you were going to lift the Medicare levy.
TREASURER:
Under my Treasurership taxes have come down. Taxes on income have come down. The bank levy was introduced for the reasons I've said and I make no apologies for it. Absolutely none. And I didn't say it was a temporary thing, I said it was a permanent thing and it is a permanent thing and it should be a permanent thing. What I am saying to Australians, is that our Government has a tax speed limit. We think you need to keep under that speed limit and keep expenditure under control, because that's how you run a strong economy. That's how you run a strong Budget. That's how you can say to the families of children who have Spinal Muscular Atrophy, "we can pay for those drugs for your kids". That's guaranteed by a stronger economy and a government that knows how to live within its means.
UHLMANN:
Well, Treasurer, next time we do this we will have the figures in front of us and we will talk again. Thank you.
TREASURER:
Thanks Chris.